July 1, 2015 3:25 PM
A Review of the Poverty Cure Documentary Series
Poverty Cure is a six part documentary series directed and hosted by Michael Matheson Miller, produced by Acton Media, and was released on December 5, 2014. The film is a project of Poverty Cure, a Christian-based organization that puts together a network of institutions in an effort to defeat poverty through the means of capitalism and entrepreneurship.
This documentary series is primarily targeted at Christians who are presumably active in their faith-based communities. It proposes that Judeo-Christian values can serve as a beneficial moral code for entrepreneurs and businessmen. The series argues that this moral code will guide and serve as the means for businessmen to run companies effectively to serve the impoverished by providing them work and a place to start businesses of their own.
The Christian values are reiterated throughout the entire series, and at times the rhetoric distracts from the series’ main argument. However, once the viewer is aware of the organization’s values and their target audience, the Judeo-Christian language seems more reasonable.
That aside, the series argues its case successfully, convincing at least this viewer that the developing world does not need charity, foreign aid, or philanthropy. Further, it demonstrates that developing countries and poverty-stricken populations require a free market society, open trade, and accessible investment opportunities.
From the start, the series does well to discredit celebrity campaigns that “combat poverty,” massive foreign aid campaigns, and substantial corporate donations, which is also known as “dumping.” We see that these actions cripple local economies of developing nations. The series uses the example of a Rwandan farmer who provides his local market and community with eggs. When an aid campaign group decided that they were going to continually donate eggs to the village, they effectively drove the farmer out of business. The community then became dependent on egg donations. Consequently, when the aid campaign stopped donating eggs, the community was unable to react to the change and was forced to import eggs from another region. While the intentions may be good, they can actually cause local businesses to lose their customers, subsequently crippling the local economy by stagnating or even reversing business growth.
The series admits, correctly so, that people start these campaigns because they have good hearts and good intentions; they want to end suffering in the world and help those who are impoverished, so they think the easiest thing to do is donate goods and services to these people. However, Poverty Cure makes it evident that these strategies do not work, and can actually do more harm to the community.
June 29, 2015 2:43 PM
The clock is ticking on the Export-Import Bank’s upcoming reauthorization. For the larger part of the past eight decades, Ex-Im’s existence has continued unchallenged and generally conceded as just another example of “the way Washington works.” However, this year is different. Bipartisan support for closing Ex-Im, and ending its crony practices, has grown to an all-time high. Here are the top 5 reasons why it’s time to finally close the Ex-Im for good.
Ex-Im’s policy is to secure financing for companies that might not be able to secure it in the open marketplace. But that actually isn’t Ex-Im’s only mandate. Ex-Im only secures financing when the benefiting company has a high likelihood of paying back the debt. Companies that meet the former criteria may fail to be eligible under the latter, and vice versa. Companies with the high likelihood to pay back debt probably wouldn’t run into problems securing financing in the first place. In theory and in practice, Ex-Im’s dual mandate is nothing short of a massive contradiction.
There’s a reason Ex-Im is called “Boeing’s Bank”. It’s because over 40% of Ex-Im’s business “invests” in Boeing. In fact, the top 10 companies financed by Ex-Im swallowed up 76% of its entire 2013 budget. Sound like cronyism to you too? Ex-Im may call itself “pro-business,” but pro-market advocates know what’s behind the curtain.
June 24, 2015 10:55 AM
The United States, along with many other countries, is adopting the Basel III capital standards for banks. The Basel standards are complicated, and they require different levels of capital financing (i.e., stock ownership) for different kinds of assets. The general rule is that more risky investments are required to be financed with a higher proportion of capital. Less risky assets have lower capital standards. In other words, the required mix of liabilities—owners’ equity and borrowing—used to finance assets changes with the expected risk of those assets.
Since the Basel standards were written by governments with some help from the world’s major banks, they naturally give favorable treatment to government debt held by banks. In fact, the risk-weighted capital requirement for U.S. Government debt or U.S. Government-backed debt is zero. If a bank holds nothing but U.S. Government debt or U.S. Government-backed debt, it could in theory be financed with no capital under the risk-weighting approach! This is limited in practice, however, by additional leverage-based capital requirements that do not use risk weights. Regardless, the Basel III standards clearly give banks an incentive to invest in more government debt and government-backed securities then they would without this preferential treatment. By investing in government-backed debt, banks can artificially increase their profits per unit of ownership (return on equity).
Enter the Ex-Im. If a bank makes a loan to a foreign firm to buy U.S. products, Ex-Im can step in and guarantee that debt. The full faith and credit of the U.S. government attaches to Ex-Im guarantees, eliminating any commercial or other risk the bank has taken on. Courtesy of Ex-Im, the bank now holds a risk-free asset with a greater return than other risk-free assets. In addition, the Basel rules let the bank be funded with less capital because of the government’s support for the Ex-Im-backed loan. That lets the bank generate higher profits relative to its stock, artificially boosting bank owner profits by putting taxpayers on the hook if the loans go bad.
In this way, the Export-Import bank is a corporate welfare program not just for exporters, but also for banks.
June 23, 2015 6:55 AM
Many people believe U.S. companies should export as much as possible, and buy imports only when necessary. Adam Smith called this balance-of-trade obsession “mercantilism,”acidly noting in The Wealth of Nations that “in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer.”
Or, as Milton Friedman put it more recently, “imports are the goods and services we get to consume without having to produce; exports are the goods and services we produce, but don’t get to consume.”
Right now, the U.S. runs a current account deficit, popularly called the trade deficit, of $40.9 billion. That means Americans are importing more than they export. Trade balancers would instead prefer a current account surplus. A major part of the Export-Import Bank’s mission is to move the trade balance in that direction.
As it turns out, there is an easier way to shift America’s balance of trade towards exports that does not require an Export-Import Bank at all. First, fill a container ship with American-made goods. Then, send it out to sea. Once it leaves U.S. territorial waters, the goods count as exports in official statistics.
Before the ship reaches port overseas, have the crew sink the ship (and escape safely, of course). As far as U.S. trade balance statistics are concerned, the best place for all those goods is the ocean floor. That way they cannot be exchanged for imports.
The point is that exports are not automatically a good thing, and the Export-Import Bank’s mission in this regard is misguided.
June 22, 2015 10:34 AM
One plank of the Export-Import Bank’s mission is to give financing to companies that might not be able to get it from the private sector. But another plank requires Ex-Im to keep its risk in check by only making or backing loans it is confident will be paid back. Both planks sound reasonable on their own, but in practice they contradict each other. This makes it difficult, if not impossible, for Ex-Im to be an effective contributor to the financial system.
If private sector banks are unwilling to lend to a company, it is probably because those banks don’t expect to get their money back. Prudence dictates that Ex-Im also stay away from such a risky investment, despite its mandate to provide financing where the private sector won’t.
A different company may look like a solid investment, with very little risk of default. This company certainly meet’s Ex-Im’s risk management criteria, and would qualify for Ex-Im financing. But this company will also have very little trouble securing private sector financing, leaving no market failure for Ex-Im to correct.
At the very least, the Export-Import Bank needs to refine its mission in a way that is logically consistent. Its current dual mandate simply will not do. Better, Ex-Im should close up shop and leave risk evaluation to companies that have their own money at risk, rather than ours.
June 19, 2015 2:07 PM
When government has a lot of money and power, it is natural for people to curry its favor. It is just as natural for those wielding money and power to use it for personal gain. The Export-Import Bank provides numerous real-world examples of this human frailty. Last year, The Wall Street Journal reported that four Ex-Im employees have been removed or suspended in recent months, “amid investigations into allegations of gifts and kickbacks.”
Johnny Gutierrez, an Ex-Im employee, was one of the four, and recently pleaded guilty in court to accepting $78,000 in bribes from an executive of Impex Associates, a Florida-based construction equipment manufacturer that has received Ex-Im financing on multiple occasions. The other cases involve two “allegations of improperly awarding contracts to help run the agency,” and another employee who accepted gifts from an Ex-Im suitor. A spokesman responded to the allegations by drily noting that "the Export-Import Bank takes extremely seriously its commitment to taxpayers and its mission to support U.S. jobs."
June 19, 2015 12:36 PM
The 2010 Dodd-Frank Act effectively restricted U.S. business’s ability to obtain minerals from the war-torn nation of the Congo and surrounding countries. That caused massive unemployment and hunger in the Congo, and huge job losses in mining communities. By driving out Western buyers, it gave Chinese firms a virtual monopoly on some Congolese minerals.
Dodd-Frank imposed costly auditing and reporting requirements on companies that use minerals such as tin, tungsten and gold, requiring them to report on their use of minerals not just from the Congo, but also peaceful neighboring countries like Tanzania, which are effectively punished merely for being next to the Congo. At least 6,000 companies are affected, including Apple, Ford, and Boeing, costing them billions of dollars.
African smugglers have benefited from Dodd-Frank, notes a recent article in Politico, as “clean miners” in the Congo, the world’s poorest country, simply can’t afford to comply with Dodd-Frank’s certification requirements.
As Politico reported,
the boycott prompted by the Dodd-Frank Act put thousands of eastern Congolese miners out of work. The World Bank has estimated that 16 percent of Congo’s population is directly or indirectly engaged in informal mining; in North Kivu in 2006, mining revenue provided an estimated two-thirds of state income. But revenues to the provincial government’s coffers fell by three-quarters in the four years before 2012, in part because of what officials called the “global criminalization of the mining sector” of eastern Congo, as encapsulated in laws like Dodd-Frank. The state’s loss is the smugglers’ gain: When the official routes are closed, the clandestine trade picks up the slack.. . .
Despite Dodd-Frank and the spate of efforts to curb conflict mineral violence in the early 2000s, it appears unlikely that the certification schemes will ever reliably cover the whole of eastern Congo’s mining trade. Clean miners have been squeezed, as the retreat of Western buyers has let Chinese comptoirs gain a near-monopoly on Congolese coltan, allowing them to dictate prices.
The efforts to impose some control on the mineral trade . . . .does so at the cost of weakening the already precarious livelihoods of eastern Congo’s diggers and porters and their dependents.
This harm was completely predictable. As Walter Olson noted earlier,
Economic sanctions, when they have an effect at all, tend to inflict misery on a targeted region’s civilian populace and often drive it further into dependence on violent overlords. That truism will surprise few libertarians, but apparently it still comes as news to many in Washington, to judge from the reaction to this morning’s front-page Washington Post account of the humanitarian fiasco brought about by the 2010 Dodd-Frank law’s “conflict minerals” provisions. According to reporter Sudarsan Raghavan, these provisions “set off a chain of events that has propelled millions of [African] miners and their families deeper into poverty.” As they have lost access to their regular incomes, some of these miners have even enlisted with the warlord militias that were the law’s targets.
June 18, 2015 12:03 PM
Greece’s neglected payment to the International Monetary Fund on Friday, June 5, has caused escalated tensions in the negotiation process between creditors and Greek Prime Minister Alexis Tsipras. As the pressure to settle on a deal increases, Greece decided last week that they would take the option, posed to them by the IMF, to settle all four of their June loan repayments at the end of the month. This has spurred unrest for the people of Greece, as well as its creditors and Troika.
After the announcement that Greece would be missing its scheduled repayment, Tsipras took the stage to address the Greek Parliament on the latest deal proposed by European Commission President Jean-Claude Juncker. The deal would provide Greece with a €7.2 billion bailout, which would require Greece to undergo major economic reforms. Tsipras notably stated that the deal proposed by the European Commission was “absurd” and labeled it as “irrational, blackmailing.” The European Commission officials were surprised by the complete rejection of their proposed deal.
Soon after, on June 8, President Obama announced in a press conference that, “What [a deal] is going to require is Greece being serious about making some important reforms, not only to satisfy creditors, but more importantly, to create a platform whereby the Greek economy can start growing again.” As pressure builds for Tsipras and Greek creditors, the world waits anxiously for one of them to cave.
It appeared that Tsipras had no intention of conceding any ground when Athens proposed another deal, on June 9, insistent upon debt relief. However, creditors came back with a stone-walled response: debt relief was off the table, and furthermore, that Greece must accept major economic reforms.
Tsipras seems to be testing the European Commission’s patience; the term “paperology” has been coined by the Commission to describe the Greek Prime Minister’s actions.
June 18, 2015 9:51 AM
General Electric CEO Jeffrey Immelt is claiming that closing the Export-Import Bank would mean “economic catastrophe.” He must use the term differently than most people do. A bit of math shows why.
According to page 6 of Ex-Im’s 2014 annual report, the bank did $27.5 billion of business in 2014. The Bureau of Economic Analysis estimates GDP in the fourth quarter of 2014 to be $17.7037 trillion (see Table 3, page 8). This means Ex-Im’s business last year was equivalent to about one sixth of one percent of GDP. This is par for the course.
Confining the comparison just to America’s $2.35 trillion of exports, everything Ex-Im did all of last year is equivalent to less than 1.2 percent of exports. Seeing as many Ex-Im-financed projects would still happen without the bank’s involvement including GE, by Immelt’s own admission—its true net impact is almost certainly much smaller than that.
If anything, by redirecting billions of dollars of capital towards the politically connected and away from deserving entrepreneurs, Ex-Im is preventing the economy from reaching its true potential.
June 17, 2015 9:17 AM
Ex-Im officials claim the vast majority of its lending activities go to smaller businesses. This is true by number of loans—in 2013, 2,160 out of 2,775 businesses receiving Ex-Im financing were small businesses, or just more than 78 percent. But Ex-Im’s claim is false by the more important metric of dollar value of loans. In most years, more than 80 percent of Ex-Im financing, measured in dollars, goes to big firms. Also worth noting: Ex-Im’s in-house definition of “small business” covers firms with up to 1,500 employees.
Ex-Im’s charter states “the Bank shall make available, from the aggregate loan, guarantee, and insurance authority available to it, an amount to finance exports directly by small business concerns … which shall be not less than 20 percent of such authority for each fiscal year.”
Small business’ actual share of Ex-Im financing has failed to meet that 20 percent threshold in 2011 (18.45 percent), 2012 (17.11 percent), and 2013 (18.96 percent). 2014 was the first year Ex-Im met that threshold since at least 2010.
Small business advocates who favor keeping or expanding Ex-Im should note that Ex-Im gives financing to approximately one in 10,000 small businesses. Considering approximately 20 other agencies give subsidies to small business, Ex-Im’s closure would have very little effect on the amount of subsidies small businesses receive. Most of its closure’s impact would be felt by its top ten beneficiaries, all of which are large companies by anyone’s definition of the term.